Minchin Dilutes Message On Superannuation
The Age
Tuesday January 24, 2006
FINANCE Minister Nick Minchin yesterday moved to lower expectations of tax on superannuation contributions being scrapped in this year's budget.
Just 24 hours after he called for removal of the tax, Senator Minchin said his comments should not be seen as signifying any immediate move to "reduce or abolish the 15 per cent tax"."I see this as part of a longer-term debate over national savings," he said, "not, as has been suggested by some media reports today, to flag an immediate intention by the Government to reduce or abolish the tax in the 2006-07 budget." Despite a chorus of support from business groups, economists and the Labor Party for the removal of the $3.3 billion tax, Senator Minchin warned against loosening of Government purse strings. "In my speech to the Young Liberal Movement yesterday, I made the point that the current budget surplus is not so large that we can afford the sort of income tax cuts some are suggesting without overheating the economy and risking higher interest rates," he said. "I suggested that in the longer term we should consider how we tax superannuation savings, noting that any tax relief in this area would not overheat the economy."Any substantial run-down of the surplus, either through increased spending or large tax cuts, could risk putting upward pressure on interest rates."Australian Industry Group chief executive Heather Ridout said that while axing the super tax would be a major boost to national savings, the Government had to consider sweeping reform to the entire tax system.Overhauling the tax system would go a long way to boost incentives for low and middle-income earners, Mrs Ridout said. "Smart governments can do more than one thing at a time and removing the super tax and cutting personal tax rates should not be seen as an either/or proposition," she said. CPA Australia said under the present tax arrangements on super, there was virtually no financial incentive for people on the 15 per cent tax rate to save money. "The removal of the up-front contributions tax would go a long way to ensuring more Australians have adequate retirement savings to maintain their standards of living," CPA senior tax adviser Garry Addison said.The director of economics consultancy Access Economics, Chris Richardson, said a cut in super taxes was much safer than an income tax cut, as that could force a rise in interest rates. Labor assistant treasury spokesman Joel Fitzgibbon said that while the Opposition supported the proposal to scrap the $3.3 billion tax, it was the ALP that first suggested it.Federal Treasurer Peter Costello declined to comment.
© 2006 The Age